Gender and the Financial Crisis: Maybe not what you think

from Julie Nelson

I got a call yesterday from a German TV station, asking me for ideas for a program on “Is the economy becoming female?” The two women reporters were particularly interested in the hypothetical question, “If there had been more women on Wall Street, would the financial crisis have occurred?” I’m afraid I gave them rather a more complicated and subtle response than would fit into a TV sound bite, and one that goes deeply into our assumptions about economic life.

The story they wanted—preferably with great visuals!—was about how (as they see it) women’s greater communicative and social “soft” skills are more suited to contemporary business needs than men’s (as they see it) propensities to greater aggression and risk-taking. This drives me nuts, for two reasons.

The first reason is the reification of stereotyping, or as many feminists like to call it, “essentializing” involved in this story. I’ve been quite fascinated with work on the cognitive psychology that underlies stereotyping. It seems that our brains have a strong tendency to group things together for easy processing, and we then tend to think that what is easy is also true. One way to make gender issues easy is to insist on treating males and females as a single group, resolutely denying that any observed differences in behavior come from anything but warped socialization. “Sameness” is an easy concept. Another easy out is to think of males and females as nearly different species due to differences in genetics and hormonal influences from the womb—the “Mars versus Venus” approach. “Difference” is an easy concept.

In fact, research done on issues such as social intelligence, risk-taking, or leadership styles usually find only fairly small differences, on average, in adults or older children. Researchers in psychology summarize these using d-values (differences in means divided by the pooled standard deviation), which give an idea of how important cross-gender variation is relative to within-gender variation. A d-value of around .20, for example, which is in the ballpark of many d-values found, means that 54% of the scores for one gender exceed the median (50^th percentile) score for the other (Hyde, 2005). If you sketch the corresponding distributions, they largely overlap. These are hardly “Mars versus Venus” findings. Researchers in psychology are often cautious, as well, in making conclusions about the roles of biology and socialization—as well as their interplay, as culture shapes human physiological development—in creating any difference.  (One notable exception, however, seems to be in behavioral and experimental economics. In what I have read, d-values do not seem to be generally reported by economists, with the emphasis being put, instead, on the statistical—versus substantive—significance of gender differences found.) “Broadly similar but also a bit different on average” seems, unfortunately, to be a non-easy concept. And, unfortunately, overlapping bell curves is not exactly the sort of visual image that the TV reporters were looking for.

The second reason the suggested story line drives me nuts is that it ignores a deeper level at which gender beliefs and gender stereotypes have in fact strongly shaped behavior in the areas of business and finance.

Many stories coming out of bond-trading rooms and other realms of high-flying commerce attest to a frequent macho, swaggering, risk-loving, aggressive atmosphere, often alluded to in the media as being testosterone-soaked. I see no need to question the veracity of these stories, having often experienced an only slightly more subtle variant of this atmosphere in academic economics seminar rooms. And certainly a tendency by many financial market actors to take excessive risks, while showing a distinct lack of care for the adverse results of these decisions on clients or anyone else, is a big piece of the financial crisis story.

The essentialist story about what causes this atmosphere attributes it to the participants being mostly male. The more subtle alternative I’d like to suggest, however, is that it is the culturally ascribed masculinity of the financial sector that explains both the predominant maleness of its participants and a one-sided emphasis on stereotypically masculine behaviors. Beginning with the Classical economists, markets have been thought of as mechanical, populated by autonomous agents driven by self-interest, competition, and a drive for achievement—all areas of life associated with masculinity. Agents have often also been thought of as guided by (masculine) rationality (though, with evidence of social-emotional herd behavior, more people are coming to doubt that now). Meanwhile, considerations of human personal relations, care, cooperation, the nurturing conservation of life, and emotion—explicitly excluded from economic life by an approach that tried to emulate physics—were read off onto the feminine-stereotyped realms of home and family. These “soft” considerations have often been perceived as both foreign to (impersonal, rational) market behavior, and unnecessary due to the presumed “self-regulating” nature of markets. Women, stereotyped as the carriers of all those denigrated considerations, have been also, in consequence (and to the benefit of male consolidation of power), considered unsuitable and unnecessary in such environments.

What is actually underlying the financial crisis, then, is not a story of too many testosterone-driven men and too few caring women. Instead, we should be in shock, wondering about why in the world we ever dreamed that human-made markets did or could ever function using only one-half of human-shared capacities. We, as a society, bought the Brooklyn Bridge when we came to believe that emotions and social phenomena don’t play any role in commerce and finance, and that care and caution about outcomes could be thrown to the wind in these realms, by whoever is in charge.

Now, if anyone can come up with some good TV visuals for this story, let me know.